Currency crisis, tension with U.S. are weighing on Turkey

ISTANBUL — Some Turks are reacting with defiance to their plunging currency and an escalating trade and political dispute with the United States – an indication that they are ready to endure economic pain and risk further deterioration in a key, yet troubled alliance dating from the Cold War.

“We don’t like those who don’t like us,” said Rifat Tepe, an electronic goods seller in Istanbul who said he will heed a call by President Recep Tayyip Erdogan to stop selling American electronic products.

turkey raises tariffs on u.S. cars, alcohol, coal

ANKARA, Turkey — Turkey said Wednesday that it is increasing tariffs on imports of some U.S. products, escalating a feud that has helped trigger a currency crisis.

In a decision announced in the Official Gazette, Ankara said it will impose extra tariffs on imports of products including rice, vehicles, alcohol, coal and cosmetics.

Tariffs on American cars were doubled to 120 percent while tariffs on alcoholic drinks rose to 140 percent.

Turkey’s Vice President Fuat Oktay said on Twitter that the tariffs on certain products were increased “within the framework of the principle of reciprocity in retaliation for the deliberate economic attacks by the United States.”

Analysts question the effectiveness of any Turkish boycott of U.S. goods and view Turkey’s tit-for-tat taxes – imposed Wednesday on American exports, including cars, tobacco and alcohol – as mostly symbolic because they have relatively little value to a global trade giant engaged in similar disputes with China and other major economies. But the Turkish government’s framing of its problems as an epic battle for sovereignty against outside enemies, particularly President Trump, resonates among core supporters, even as fears grow that further decine of the lira could threaten bankruptcies among Turkish firms carrying high foreign currency debt.

PUSH TO BOYCOTT U.S. PRODUCTS

While Turks who propelled Erdogan to election victory in June recognize that they could face hardship, there is little domestic criticism of a leader who presided over years of debt-fueled growth that drew warnings of a looming bust and currency crisis. Turkey is deeply divided between Erdogan’s pious Muslim base and secular Turks who once held sway over the country, but opposition voices have been mostly muted as Erdogan, who has concentrated power in a new presidential system of government, projects an image of a righteous state under siege.

“I think we should always use locally made products,” said Gurcan Ulusum, another Istanbul electronics goods shop owner. “After the spike of the U.S. dollar, prices of foreign products have increased dramatically and the consumer has no purchasing power.”

Haydar Tastan, an Istanbul resident shopping for a cell phone, said a boycott of American goods could be a “great thing” but he wished there were alternatives.

“I’m not looking for a new product anyway,” he said. “I’m looking for something that’s secondhand.”

Cevdet Erdol, president of the Health Sciences University in Istanbul, urged Turks to boycott U.S. tobacco products and “to stop smoking altogether,” according to Turkey’s state-run Anadolu news agency. It said the southeastern Turkish city of Gaziantep has halted imports of American brands and products.

LIRA HAS DECLINED 40% IN 2018

Many economic crises in emerging market countries like Turkey follow periods of domestic support for governments that focus on electoral gains and avoid unpopular economic reforms, and pressure on the Turkish lira is likely to persist if Turkish authorities shun decisive action, said Nafez Zouk, an analyst at Oxford Economics. Possible measures include an interest rate hike, capital controls, a reduction in spending and an easing of tensions between Turkey and the U.S., which are NATO allies, he said.

The lira, which has lost about 40 percent of its value this year, recovered slightly Wednesday after the Turkish government took steps to support it.

Still, analysts expect the currency crisis to persist or even worsen, and the feud with the U.S. simmered as a Turkish court rejected an appeal for the release of Andrew Brunson, an American pastor being tried in Turkey on espionage and terrorism-related charges. Washington has imposed financial sanctions on two Turkish ministers and doubled steel and aluminum tariffs on Turkey as the Trump administration tries to secure the release of Brunson, who it says was framed.

COMPLEX RELATIONSHIP

The long relationship between Turkey and the U.S. was always “high maintenance” and often in “crisis management mode,” said Ozgur Unluhisarcikli, director of the office of the German Marshall Fund in Ankara, the Turkish capital. Now, he said, the alliance between the two is “very vulnerable” because they have conflicting interests as well as different priorities, including in the Syrian war and over relations with Russia.

“It’s not only one problem,” he said. “Pastor Brunson is perhaps the tip of the iceberg.”

One Ankara resident, Aydin Cavus, said consumer prices are “normal right now” while another shopper said inflation was hitting hard, reflecting mixed impressions about the looming impact of Turkey’s financial challenges.

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